HDAP & the MA Health Connector:Understanding Premium Tax Credits & Tax Reconciliation

January 29, 2019

Dennis P. CantyCoordinator of HDAP and Federal GrantsMassachusetts Department of Public Health

Anne Callachan & Brittany MorganHealth Insurance Enrollment Specialists BRIDGE TeamCommunity Research Initiative

BRIDGE = Benefits, Resources, & Infectious Disease Guidance & Engagement

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Field-Based HDAP & Benefits Enrollment:

o Offers on-site HIV Drug Assistance Program (HDAP) enrollment assistance for medical case managers on behalf of their clients

o One-on-one and group assistance navigating the complex and challenging health insurance enrollment system, including MassHealth, the MA Health Connector, and private insurance

Ongoing Technical Assistance Services:o In-person trainings on a variety of HDAP topics to case managers, financial

benefits staff, pharmacy staff, other providers, peer advocates, and consumers

o Individualized assistance and group case consultations to clients and case managers – phone and walk-in

o New “Did You Know?” ongoing information series for medical case managers

HDAP BRIDGE Team(Benefits, Resources, & Infectious Disease Guidance & Engagement)

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Given the high volume of HDAP applications processed during Open Enrollment, we want to take a moment to highlight a few tips to ensure the timely processing of your clients' applications:• Consider initiating the process of submitting recertifications eight (8) weeks prior

to the client's termination date in order to avoid gaps in coverage.• To prevent automatic rejection of your clients' application, please ensure that

applications include the following information before being transmitted: o Client & Clinician signatureo Sufficient documentation to verify proof of current income and current Massachusetts

residencyo Proof of HIV status (including submission of client's most recent VL)

To request expedited processing of client applications, please call 617-502-1700 to speak with an HDAP customer service team member. When you call, be prepared to tell staff the date and time the application was faxed and the number of pages.

HIV Drug Assistance Program (HDAP)Tips to ensure timely processing of your application

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• Review of Premium Tax Credits (PTCs)

• PTC-Related Tax Forms and Reconciliation

• HDAP/CHII Requirements for PTCs

o Paying PTC adjustments to the IRS on behalf of clients

o Collecting PTC-related refunds from clients

Overview

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After January 23, 2019, people can’t buy a health insurance plan for the rest of 2019 unless they have a life change — like having a baby, getting married, or losing other health coverage — that qualifies them for a 60-day Special Enrollment Period (SEP).

Open Enrollment is Over

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Premium Tax Credits

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November – January Open Enrollment Plan Selection + initial APTC

calculated

January

Health Connector sends out 1095-A for

prior year

April 15

Federal Income Tax Returns Due (Including

Form 8962)

April – October

Late filing period; federal refunds

processed

The Premium Tax Credit

Cycle

Work with Case Manager + Tax

Preparer + BRIDGE

Consider Plan Options with

Case Manager + BRIDGE

Amend Taxes if necessary; look out for refund

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• Premium Tax Credits are subsidies that help individuals and families pay for health insurance purchased through the MA Health Connector.

• The amount of PTCs a household receives, if any, is based on the annual income they estimated on their MA Health Connector application.

*

What are Premium Tax Credits (PTCs)?

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•PTCs can be received in one of two ways:

o In advance - Advance Premium Tax Credits (APTCs) are

paid directly to the insurer each month and lower the

cost of one’s monthly health insurance premium; or

o Lump sum – people can claim the Premium Tax Credit

in a lump sum when filing their federal income taxes

for the previous year.

What are Premium Tax Credits (PTCs)?

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• If CHII is paying a Health Connector premium on client’s behalf, then the client must take the full amount of PTCs they are eligible for in advance (applied monthly).

• If APTCs are used to lower the cost of a client’s monthly health insurance premium, the client is required to “reconcile” this amount when filing a federal income tax return.

• If people do not file taxes and reconcile their APTCs, they will lose their ConnectorCare eligibility and will owe the IRS.

Why does this matter?

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AIDS Drug Assistance Programs (ADAPs) are required by HRSA to “vigorously pursue any excess premium tax credit a client receives from the IRS” owed to the ADAP.

ADAPs may be able to pay Marketplace health-insurance-related tax payments owed to the IRS on behalf of ADAP clients.

HRSA/HAB Policy on Tax Credit Reconciliation (PCN 14-01)

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“If you get APTC…do you agree to file a federal income tax return?”

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XX

Individuals and families may be eligible for PTCs if they:

1) Enroll in a health plan through the MA Health Connector;

2) Are not eligible for affordable and adequate employer coverage or government plan (i.e., VA or Medicare);

3) Have household income between 100% and 400% FPL (between $12,490-$49,960* for an individual);

4) Agree to file taxes (if married must file jointly except in specific circumstances).

*2019 FPL rates

PTC Eligibility Requirements

In Tax Year 2018, 400% FPL = $48,560 for a single person

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Reconciliation is done by comparing two figures:

1. The amount of APTCs applied during the year (paid by the IRS directly to the health plan).

2. The PTC that you actually qualify for based on your household’s actual income for that year.

If there’s a difference between the two figures, this will affect the amount of your refund or taxes owed.

Reconciliation Process

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• If your actual income for 2018 was more than your estimated income, the government has overpaid you and you will have to pay back some of the money that lowered your monthly insurance premium payments (APTCs).

• If your actual income for 2018 was less than your estimated income, the government has underpaid you and you will receive the difference as an extra credit on your federal tax return.

Reconciliation Process

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If you received APTCs (including ConnectorCare) in 2017 and/or 2018 and you do not file a 2017 and/or 2018 tax return and reconcile the APTCs you received:

• you will not be eligible for APTCs or ConnectorCare in 2019

-AND-

• The IRS will contact you to pay back some or all of the 2017 & 2018 APTCs.

Reconciliation Process: Important Considerations

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PTC-Related Tax Forms and Reconciliation

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Required Documents for Reconciliation

Tax Forms Purpose Origin

1095-A – HealthCoverage through the MA Health Connector

Verifies type and period of coverage for 2018, premium amounts, and APTCs applied

MA Health Connector –Sent out each January

Form 8962 – Premium Tax Credit

Adjusts total tax credit amount by comparing reported and actual income

IRS – must be filled out using the 1095-A

Instructions for Form 8962

Instruction guide that client or their tax preparer needs to complete Form 8962

IRS – Available online

1040 – US Individual Income Tax Return

Required Tax Document IRS - Must be filled out by all APTC recipients

New Schedule 2 (Excess APTC) and Schedule 5 (Net PTC)

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Tax Forms and the Reconciliation ProcessStep 1: Receive Form 1095-A

From the MA Health Connector, includes:

A. monthly premium amount;

B. the monthly premium amount of the second-lowest-cost silver plan (the benchmark federal government uses to determine how much a person will receive in APTCs)

C. the amount you received in APTCs every month.

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Tax Forms: Form 8962Step 2: Complete Form 8962

When you file your federal taxes, use information from the 1095-A and IRS Form1040 (and new Schedules) to fill out IRS Form 8962. This compares the amount received in APTCs to the amount that you were entitled to based on your actual federal income reported for 2018. This screenshot shows the top of the form 8962.

To complete this form you mustuse the table provided in

“Instructions for Form 8962” 23

Tax Forms: Form 8962, continuedStep 2: Complete Form 8962

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Match to the 1095-A

Tax Forms and the Reconciliation Process

Step 2 Continued: Form 8962

Finally, record the amount owed to you as a refund (on line 26) or the excess payment you owe back to the IRS (line 29).

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Line 26 Net premium tax credit will tell you if you’ll receive a refund from the IRS.IRS Form 8962

Line 29 Excess advance payment of PTC will tell you if you’ll owe an amount to the IRS.

Tax Forms and the Reconciliation ProcessStep 3: Putting It Together on the Federal Tax Return

• The 2018 IRS Form 1040 has been redesigned.

• It is one page, double-sided.

• The back side of the 1040 goes from questions 1-23.

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If you have an amount on IRS Form 8962 Line 29, put that amount onto Schedule 2 Form 1040 Line 46: Excess advance premium tax credit repayment.

Tax Forms and the Reconciliation ProcessStep 3: Putting It Together on the Federal Tax Return

• IRS Form 1040 is supplemented with new Schedules 1 through 6. These additional schedules will be used as needed to complete some tax returns. Schedule 2 Form 1040 (below) includes questions 36-47.

Schedule 2 Form 1040

• II

If you have an amount on IRS Form 8962 Line 26, put that amount onto Schedule 5 Form 1040 Line 70: Net premium tax credit.

Tax Forms and the Reconciliation ProcessStep 3: Putting It Together on the Federal Tax Return

• Schedule 5 Form 1040 (below) includes questions 65-75.

Schedule 5 Form 1040

Tax Forms and the Reconciliation ProcessStep 3: Putting It Together on the Federal Tax Return

IRS Form 1040 (below) includes specific boxes to document either:

• money you owe to the IRS because of an overpayment (Excess ATPC, Line 11), which needs to be included with your tax return; or

• money owed to you as a refund (Net PTC, Line 17).

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If you have an amount on Schedule 2 forExcess APTC, put that amount on 1040 Line 11.

If you have an amount on Schedule 5 for Net PTC, put that amount on 1040 Line 17.

Tax liabilities (money you may owe) and refunds (money owed to you) are assessed in total.

• If you owe the IRS because of a premium tax credit overpayment (Excess APTC), the IRS will take the payment directly from your income tax refund if you are due to receive one.

• On the other hand, if you are owed a refund from the IRS because of a premium tax credit underpayment (Net PTC), the IRS will first look to whether you owe other income taxes for that year and apply the refund to those liabilities first.

Tax Forms and the Reconciliation Process

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HDAP/CHII Requirements for PTCs

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CHII Requirements for PTCs

CHII enrollees with Health Connector Plans must submit the following copies of 2018 federal tax forms to HDAP/CHII:

❑ IRS Form 1040 (both sides of 1-pager): www.irs.gov/pub/irs-pdf/f1040.pdf• IRS Schedule 2 (Form 1040): www.irs.gov/pub/irs-pdf/f1040s2.pdf if

they have Excess repayment of premium tax credits OR• IRS Schedule 5 (Form 1040): if they have Net premium tax credit.

❑ IRS Form 8962: www.irs.gov/pub/irs-pdf/f8962.pdf❑ HC Form 1095A – mailed from MA Health Connector • 1-877-623-6765 (call for copy to be mailed) • www.mahealthconnector.org/taxes/tax-form-copies-and-corrections

(log into their account and follow download instructions

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CHII Requirements for PTCs

• If a client owes a payment to the IRS because they received too much in APTCs in 2018, HDAP/CHII may be able to pay this amount to the IRS on the client’s behalf.

• If client gets a refund from the IRS related to APTCs and HDAP/CHII paid for their health insurance premiums, the net Premium Tax Credit portion of their 2018 federal income tax refund (pro-rated for the months CHII paid insurance premiums) must be paid by the client to HDAP/CHII.

HDAP/CHII

IRSClient

Payment Flow Chart

Net PTC Excess PTC

Tax liability & refund

CHII Requirements for PTCs:Agreement Regarding Reconciliation of Premium Tax Credits

• Clients receiving premium assistance from CHII for MA Health Connector plans and who received APTCs must sign, date, and return this agreement along with tax forms.

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• Client agrees to send HDAP/CHII any refund from the IRS related to APTC underpayment.

• Payment of this refund may be made in the form of check or money order and is expected within 10 days of receipt of the refund from the IRS.

• Client provides authorization for CRI to make payment to the IRS on a client’s behalf as a result of APTC overpayment (due to underestimation of income at time of application). (Client can opt out).

CHII Requirements for PTCs:Agreement Regarding Reconciliation of Premium Tax Credits

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• Rosa, a single tax filer enrolled in HDAP/CHII, estimated on her MA Health Connector application at the beginning of 2018 that her annual income for 2018 would be $25,000.

• Based on that estimate, she was approved for $75 a month in APTC.

• She enrolled in a plan with a $225 premium through the MA Health Connector effective 1/1/2018; CHII paid $150 of her monthly premiums for 12 months, while the other $75 was covered by APTCs.

• Suppose Rosa *actually* made $28,000 in 2018…

Reconciliation Process Example #1:Reconciling Rosa’s 2018 Premium Tax Credits

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Example #1: Income Underestimated

Actual Household Income (from 1040)

Found by matching FPL in “Table 2”

In 8962 Instructions

Corresponds to column “C” in Part II

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Rosa Client 123-456-789

1

$28,000

$12,060232

.0747

$174

$28,000

X

X

$2,092

$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75$225 $214 $174 $40 $40 $75

$2700 $2,568 $2,088 $480 $480 $900

$480$900

$420

$420

Take the amount on IRS Form 8962 Line 29 ($420), and put that amount onto Schedule 2 Form 1040 Line 46: Excess advance premium tax credit repayment.

Tax Forms and the Reconciliation ProcessPutting It Together on the Federal Tax Return

• IRS Form 1040 is supplemented with new Schedules 1 through 6. These additional schedules will be used as needed to complete some tax returns. Schedule 2 Form 1040 (below) includes questions 36-47.

Schedule 2 Form 1040

• II

$420

Tax Forms and the Reconciliation ProcessPutting It Together on the Federal Tax Return

IRS Form 1040 (below) includes specific boxes to document either:

• money you owe to the IRS because of an overpayment (Excess ATPC, Line 11), which needs to be included with your tax return; or

• money owed to you as a refund (Net PTC, Line 17).

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Take the $420 Excess APTC amount, add any other amounts from Schedule 2, and put that amount on 1040 Line 11.

Rosa enrolls in a plan through the MA Health Connector with both Advance Premium Tax Credits & HDAP/CHII Premium Assistance

Monthly Amount Who Pays/Who Gets Refunded

Monthly APTC (calculated at time of application)

$75 The government pays this amount to the insurer each month

Premium Amount left after APTC $150 Normally, Rosa would be left to pay the remainder; but since she is a CHII client, HDAP/CHII pays the remaining

amount on her behalf

Reconciliation: Did the consumer get the right amount of APTC each month?

Actual Premium Tax Credit (calculated at tax time using Form 8962)

$40 The IRS overpaid the APTC by $35 every month for each of the 12

months Rosa had coverage. This results in an additional tax burden of $420 ($35 x 12 months). HDAP/CHII can pay this amount to the IRS on

Rosa’s behalf.

Actual premium owed after APTC each month

$185

Amount owed at tax time due to overpayment

$420

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When Rosa submits to HDAP/CHII: o a copy of her 2018 federal income tax return, including

her 1040 and Schedule 2 for Excess APTC,o Form 1095A,o IRS Form 8962, ando a signed client authorization form,

HDAP/CHII will pay $420 to the IRS on Rosa’s behalf.

Reconciliation Process Example:Reconciling Rosa’s Premium Tax Credits

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• Rosa, a single tax filer, estimated on her MA Health Connector application at the beginning of 2018 that her annual income for 2018 would be $25,000.

• Based on that estimate, she was approved for $75 a month in APTC.

• She enrolled in a plan with a $225 premium through the MA Health Connector effective 1/1/2018; CHII paid $150 of her monthly premiums for 12 months, while the other $75 was covered by APTCs.

• Suppose Rosa actually made $18,000 in 2018…

Reconciliation Process Example #2:Reconciling Rosa’s 2018 Premium Tax Credits

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Example #2: Income Overestimated

Actual Household Income (from 1040)

Found by matching FPL in “Table 2”

In 8962 Instructions

Corresponds to column “C” in Part II

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Rosa Client 123-456-789

$18,0001

$18,000

$12,060149

.0397

$60

$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75$225 $200 $60 $140 $140 $75

$2700 $2,400 $715 $1685 $1685 $900

$1685$900

$785

Put the amount from IRS Form 8962 Line 26, $785, onto Schedule 5 Form 1040 Line 70: Net premium tax credit.

Tax Forms and the Reconciliation ProcessPutting It Together on the Federal Tax Return

• Schedule 5 Form 1040 (below) includes questions 65-75.

Schedule 5 Form 1040

Tax Forms and the Reconciliation ProcessPutting It Together on the Federal Tax Return

IRS Form 1040 (below) includes specific boxes to document either:

• money you owe to the IRS because of an overpayment (Excess ATPC, Line 11), which needs to be included with your tax return; or

• money owed to you as a refund (Net PTC, Line 17).

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Take the $785 Net Premium Tax Credit amount, add any other amounts from Schedule 5, andput that amount on 1040 Line 17.

Rosa enrolls in a plan through the MA Health Connector with both Advance Premium Tax Credits & HDAP/CHII Premium Assistance

Monthly Amount Who Pays/Who Gets Refunded

Monthly APTC (calculated at time of application)

$75 The government pays this amount to the insurer each month

Premium Amount left after APTC $150 Normally, Rosa would be left to pay the remainder; but since she is a CHII client, HDAP/CHII pays the remaining

amount on her behalf

Reconciliation: Did the consumer get the right amount of APTC each month?

Actual Premium Tax Credit (calculated at tax time using Form 8962)

$140 The IRS underpaid the APTC by $65 every month for each of the 12

months Rosa had coverage. This results in additional tax credits of

$785 ($65 x 12 months). Rosa must refund this amount to HDAP/CHII.

Actual premium owed after APTC each month

$85

Amount of additional Tax Credits awarded due to underpayment

$785

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After Rosa submits to HDAP/CHII:o a copy of her 2018 federal income tax return, including

her 1040 and Schedule 5 for Net PTC,o Form 1095A,o IRS Form 8962, ando a signed client authorization form,

she will also need to send a check or money order to HDAP/CHII for $785 (as a result of her PTC-related refund).

Reconciliation Process Example:Reconciling Rosa’s Premium Tax Credits

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• Ask clients if they have received their 1095-A (mailed by HC in January 2019).

• Submit signed client authorizations, federal tax returns (IRS Form 1040 and either Schedule 2 or Schedule 5), Form 1095A, and IRS Form 8962 to HDAP/CHII from clients who received APTCs, as appropriate.

If a client’s income ends up being higher than initially estimated:• They will owe the IRS due to overpayment of APTCs. HDAP/CHII may be able to pay

this amount to the IRS on the client’s behalf, based on the number of months CHII paid their premiums.

If a client’s income ends up being lower than initially estimated:• They will be due a refund from the IRS due to underpayment of APTCs. The client

must refund HDAP/CHII for each month HDAP/CHII paid a premium.

Reconciliation Process:Key Takeaways

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Report life changes to the MA Health Connector as they occur. Life changes may change the amount of APTC a client receives and reporting them may prevent extreme tax credit adjustments.

• “Life changes” include, among others,:o Changes in income;o Changes in health coverage, such as becoming newly

eligible for Medicare;o Changes to one’s household, like birth or adoption,

becoming pregnant, and marriage or divorce.

Health Connector Tips

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• Greater Boston Legal Services Low Income Tax Clinico Main office: 197 Friend Street, Boston, MA 02114o 800-323-3205; 617-371-1234; www.gbls.org

• Springfield Partners Low Income Tax Clinico 721 State Street, Springfield, MA 01109o 413-263-6500, www.springfieldpartnersinc.com/whatwedo/litc/

• Volunteer Income Tax Assistance (VITA) Programo Free tax assistance for those earning less than $54,000, the elderly, persons with

disabilities, and limited-English speaking taxpayerso Multiple MA Locations: https://irs.treasury.gov/freetaxprep/

• BRIDGE Teamo Advises active HDAP/CHII clients on reconciliation process & checks Form 8962 for

accuracyo Will pay portion of tax burden incurred as a result of Excess APTCs to the IRS, as

appropriate

Free Tax Resources

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This webinar has been recorded and will be available as a webcast along with the

slide deck on CRI’s website: www.crine.org

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Anne CallachanBRIDGE Health Insurance Enrollment Specialist

acallachan@crine.org617.502.1750

Brittany MorganBRIDGE Health Insurance Enrollment Specialist

bmorgan@crine.org617.502.1758

Massachusetts HIV Drug Assistance Program c/o CRI of New EnglandThe Schrafft City Center

529 Main Street, Suite 301Boston, MA 02129

www.crine.org

800.228.2714 (toll-free)

617.502.1703 (HDAP fax)

617-502-1701 (PrEPDAP/nPEP fax)

How to Contact Us

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